Composable Risk

Definition ∞ Composable risk in decentralized finance refers to the cumulative risk arising from the interconnectedness of various protocols and their underlying assets. When DeFi applications are built upon one another, the failure or vulnerability in one component can cascade across multiple dependent systems. This interdependence means that individual protocol risks combine, potentially creating larger, systemic vulnerabilities. Understanding these connections is essential for assessing overall ecosystem stability.
Context ∞ The discourse surrounding composable risk highlights the fragility that can emerge from the open and permissionless nature of DeFi. Recent exploits and market dislocations have underscored the need for more rigorous risk assessment and auditing practices within the ecosystem. A key development to monitor is the advancement of risk management frameworks and tools designed to identify and mitigate these aggregated vulnerabilities across integrated DeFi protocols.